Marijuana Tracking Goes Corporate

The legal weed industry is flocking to two startups

Marijuana plants grow at the MedMar Healing Center, a medical-marijuana dispensary, in San Jose, Calif., on Feb. 7, 2013.

Marijuana plants grow at the MedMar Healing Center, a medical-marijuana dispensary, in San Jose, Calif., on Feb. 7, 2013.

Photographer: David Paul Morris/Bloomberg

The lawful marijuana business topped $2 billion in U.S. sales in 2014, as Washington joined Colorado in legalizing recreational pot purchases. Soon it’ll also be legal to buy for fun in Oregon and Alaska, on top of the 19 states (plus Washington, D.C.) where it’s legal only for medical purposes. The market will likely reach $3.1 billion this year, estimates industry publication the Marijuana Business Factbook 2015. The weakest link in the supply chain has been the software designed to index and track licensed pot farmers’ plants to make sure none go missing on their way from grow room to blunt. That requires effectively tracking the bar codes or radio-signal tags affixed to the plants, as well as making sure the data can be exported to business software such as Excel and QuickBooks.

In the past year, companies such as BioTrackTHC and MJ Freeway have begun to emerge as leaders in the cannabis-software market, having developed systems to follow a grower’s inventory down to the milligram. Both charge monthly fees for their cloud or onsite software, and they’re starting to battle each other in earnest for contracts with growers and the state regulatory agencies that monitor them. “People don’t want to be seen as shady, barely legalized drug dealers anymore,” says Patrick Vo, BioTrack’s co-chief executive officer. “They want to be seen as credible.”

The programs from the two companies are designed to automate as much plant-monitoring as possible but still require a lot of data entry. A plant receives a bar code or radio tag. The grower weighs the fertilizer and other nutrients to be added and records the stems, leaves, crumbs, and flower resin trimmed off before the pot is bagged. Each package gets its own tag or bar code associated with the parent plant. The software tracks when the pot leaves the grower, gets to a dispensary, and goes out to a smoker. Every bag can be traced either to the person who bought it—in the case of medical users—or the seed it grew from, and both programs record all inventory changes, making theft easier to detect. “There’s a lot of covering our butts going on,” says Robin Hebb, chief financial officer at Trill Alternatives, which uses MJ Freeway’s software at its dispensary and three grow houses in Denver and nearby Boulder.

MJ Freeway was founded in 2010 by a couple of software-startup veterans. BioTrack, owned by Bio-Tech Medical Software in Fort Lauderdale, started in 2007, and until 2009 mostly tracked drugs such as Vicodin. Both offer features familiar to users of SAP or Oracle software, such as automatically generated sales reports, automatic updates for new regulatory requirements, and the ability to export spreadsheets to Excel. Each also comes with a few of its own bells and whistles. BioTrack allows companies to monitor employee shipment activities by using handheld fingerprint scanners, and can compare the performance of a business’s various farms or dispensaries. MJ Freeway lets managers schedule workers’ tasks and track crop data such as pH levels.

BioTrack charges its more than 1,200 clients $200 to $500 a month for use of its software, depending on the size of the grow house or dispensary, and contracts with Washington state regulators. In April it won a contract to provide its tracking system to the New Mexico Department of Health. MJ Freeway charges as much as $250 a month, plus an initial fee to customize software for its 1,000 clients.

Bigger names are becoming involved in the market. Xerox also bid to supply Washington’s system, and tracking-software company Viridian Sciences has customized a program made by SAP. Their software may appeal to governments interested in having one product of record, so that law enforcement doesn’t have to juggle competing systems. Dawne Morris, chief marketing officer of software consultant Proteus Business Solutions, says that as the market grows, “there are going to be more hands in the pot.”

The bottom line: Two startups have begun to emerge as leaders of the young market for pot-tracking database software.

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